Income Tax Exemption On Meal Cards: ₹1.05 Lakh Tax Free Benefit Under Draft Rules 2026 Explained

• Current exemption is ₹50 per meal under Section 17(2)(viii) and Rule 3(7)(iii)
• Draft Income Tax Rules 2026 propose ₹200 per meal limit
• Annual tax free benefit may rise from ₹26,400 to ₹1,05,600
• Additional tax free income could be ₹79,200 per year
• Tax savings may range from ₹10,000 to ₹35,000 depending on slab
• Draft removes earlier blocking language that restricted benefit under new regime
• Proposal is still in draft stage and not final law
• Expected effective date if approved is April 1, 2026

Income tax exemption on meal cards is suddenly trending after the Draft Income Tax Rules 2026 proposed a sharp increase in the tax free limit. For salaried employees using meal vouchers like Pluxee, Sodexo or Zaggle, this update could significantly increase tax free salary components from FY 2026 to 27.

For years, the ₹50 per meal cap remained unchanged despite rising food prices across Indian cities. Now the proposed jump to ₹200 per meal has created buzz across finance circles, HR departments, payroll teams and social media platforms. The revision, if implemented as proposed, may change how salaried employees structure their compensation and optimise take home pay. Let us break down what this means, how much you can save, what practical steps to take, and what remains unclear before final notification.

Important Disclaimer And Current Status

Before getting excited about the numbers, it is extremely important to understand the current legal position of this proposal.

The increase from ₹50 to ₹200 per meal is part of the Draft Income Tax Rules 2026 released in early February 2026 under the new Income Tax Act 2025 framework. These rules are currently in draft stage and open for public feedback until approximately February 22, 2026.

This means the proposal is not yet law. The government may accept, modify, clarify or even partially revise certain provisions before issuing the final notification. Final rules are expected closer to March 2026, and if notified as proposed, the changes are likely to apply from April 1, 2026, that is Financial Year 2026 to 27 and Assessment Year 2027 to 28.

The relevant proposal appears under the draft version of Rule 15(5)(a), Table IV, which suggests exemption of free food and non alcoholic beverages provided during working hours up to ₹200 per meal. The draft also includes paid vouchers redeemable at eating joints within this limit.

Employees should consult a qualified Chartered Accountant or tax advisor before restructuring salary based on draft provisions. Final wording could slightly change compliance requirements, reporting treatment or eligibility conditions

Also Read: Sensex Nifty Stock Market: Why Market Is Down Today And What It Signals For Investors

What Is Income Tax Exemption On Meal Cards?

The Income Tax Act, 1961 treats employer provided meals as a perquisite. Under Section 17(2)(viii) and Rule 3(7)(iii) of the Income Tax Rules, 1962, free or subsidised food provided during working hours is exempt up to ₹50 per meal.

This benefit is generally structured through employer provided mechanisms such as:

• Office canteen facility within company premises
• Non transferable meal vouchers
• Prepaid food cards such as Pluxee
• Sodexo meal cards
• Zaggle prepaid cards

The exemption typically applies to two meals per working day. Any amount exceeding ₹50 per meal is added to taxable salary as perquisite value and taxed according to the employee’s slab.

Free tea, coffee, snacks and non alcoholic beverages during working hours remain fully tax free without any monetary cap. This specific carve out has always been separate from the per meal ceiling.

The core principle is that food provided during working hours for employee welfare is not treated as full salary income up to the prescribed limit.

Current Calculation Under Existing Rules?

Let us understand the math under the current framework which has been in place for many years.

Particulars	Amount
Exemption per meal	₹50
Meals per day	2
Working days per month	22
Monthly tax free benefit	₹2,200
Annual tax free benefit	₹26,400

Under existing provisions, employees can receive only ₹26,400 per year as tax free meal benefit.

In most metro cities like Bengaluru, Mumbai, Delhi or Hyderabad, ₹50 does not cover even a basic lunch. In fact, average working day meal costs often range between ₹150 and ₹300 depending on location and food choice. The gap between real costs and tax exemption has widened over time due to inflation.

This mismatch is the primary reason tax professionals and payroll consultants have long argued that the limit required revision.

Clear Comparison: Current Rules Vs Proposed Draft 2026

The proposed change dramatically alters the numbers. The following comparison table makes the impact instantly clear.

Aspect	Current Rules	Proposed Draft 2026	Key Impact
Exemption per meal	₹50	₹200	Four times increase
Annual max benefit	₹26,400	₹1,05,600	₹79,200 additional tax free income
Tax savings at 30 percent slab	Not applicable	₹24,710 to ₹26,000 approx	Direct increase in take home
Applicability	Mostly old regime	Likely both regimes if draft stands	Wider coverage
Gift voucher limit	₹5,000 per year	₹15,000 per year	Broader tax relief

This table highlights why the proposal is being described as one of the most practical salary related tax relief measures in recent years.

Proposed Calculation Under Draft Income Tax Rules 2026

If approved without modification, the revised calculation would look like this:

Particulars	Amount
Proposed exemption per meal	₹200
Meals per day	2
Working days per month	22
Monthly tax free benefit	₹8,800
Annual tax free benefit	₹1,05,600

The increase from ₹26,400 to ₹1,05,600 translates into ₹79,200 extra tax free income per year.

For someone in the 30 percent slab plus 4 percent cess, the tax saving on ₹79,200 can be roughly calculated as follows:

₹79,200 multiplied by 30 percent equals ₹23,760.
Add 4 percent cess which equals approximately ₹950.
Total tax saving comes close to ₹24,700 to ₹25,000.

Exact savings will vary slightly based on rounding and marginal slab position.

Tax Savings By Salary Level And Slab

To make the benefit more realistic, let us examine different salary brackets and potential savings under old regime assumptions.

Example 1: ₹7 Lakh Annual Salary

At this level, many employees fall within lower or middle slabs. Assuming effective tax rate of around 10 to 20 percent after deductions, savings on ₹79,200 could range between ₹8,000 and ₹15,000 annually. This may not seem huge, but it directly improves monthly cash flow without any additional investment.

Example 2: ₹12 Lakh To ₹15 Lakh Salary

Employees in this bracket often fall in the 20 percent slab under old regime after deductions. Savings could range between ₹15,000 and ₹22,000 per year. Combined with Section 80C, HRA and standard deduction benefits, this significantly optimises total tax liability.

Example 3: ₹20 Lakh Plus Salary

High income employees falling in the 30 percent slab may save between ₹24,000 and ₹35,000 depending on final tax position. When combined with other perquisites such as gift vouchers and company provided benefits, effective take home salary increases meaningfully.

This benefit stacks with existing deductions like Section 80C investments, home loan interest, HRA and standard deduction. It does not replace them but adds another layer of tax efficient structuring.

Old Tax Regime Vs New Tax Regime

One of the most debated aspects is regime applicability.

Under the current Section 115BAC framework, many exemptions and allowances are disallowed in the new tax regime. Earlier interpretations restricted meal voucher exemption primarily to the old regime due to specific language in the rules.

However, the draft Income Tax Rules 2026 do not repeat the earlier restrictive clause in the same manner. This has led to expert interpretation that the benefit could become available under both regimes if final wording remains unchanged.

Old Regime

The old regime allows multiple deductions and exemptions. Meal voucher exemption naturally fits within this framework and enhances overall tax planning.

New Regime

The new regime offers lower slab rates but fewer deductions. If meal exemption becomes available here as well, it strengthens the attractiveness of the new regime because it provides tax free income without requiring investment or documentation.

Employees choosing between regimes in FY 2026 to 27 may find this factor influencing their decision. However, final confirmation must await official notification.

How To Actually Get This Benefit

Many articles simply advise employees to contact HR. However, the process requires clarity and proactive planning.

First, confirm whether your employer offers structured meal benefits through prepaid cards or vouchers such as Pluxee or Zaggle.

Second, during salary restructuring discussions which often occur at the start of financial year, request allocation of up to ₹8,800 per month toward meal benefits if draft rules become law.

Third, ensure that vouchers are non transferable and redeemable only at authorised food outlets. Cash conversion is not permitted.

Fourth, remember that only two meals per working day generally qualify. If employer loads higher value exceeding ₹200 per meal equivalent, the excess portion becomes taxable perquisite.

Fifth, self employed professionals and freelancers are not eligible because the benefit applies only to employer employee relationships.

For employees working remotely, exemption may still apply if food benefit is structured according to working hours guidelines.

Frequently Asked Questions

Will companies automatically increase meal card limits

No. Employers are not legally required to maximise the limit. Employees must proactively request restructuring during compensation planning cycles.

What if employer provides more than two meals

Generally, exemption is calculated for two meals per working day. Any additional meals may become taxable depending on valuation.

Does this apply to remote employees

If the benefit is provided during working hours and meets rule conditions, remote status does not automatically disqualify eligibility.

Are tea and snacks included in ₹200 cap

No. Tea, coffee and snacks during working hours remain fully exempt without monetary ceiling under existing principles.

When can this be used

If notified without change, implementation is expected from April 1, 2026. Benefits would reflect in salary structure for Financial Year 2026 to 27.

Broader Context And Why This Matters

The ₹50 per meal cap remained unchanged for decades despite substantial inflation. Food costs have risen steadily, especially in metropolitan business districts where corporate offices are concentrated.

This revision appears aligned with broader simplification efforts under the new Income Tax Act 2025. Alongside meal exemption, draft rules also propose increasing tax free gift voucher limits from ₹5,000 to ₹15,000 and revising small loan perquisite thresholds.

Public sentiment on social media platforms shows excitement mixed with caution. Many employees describe the move as long overdue. Others advise waiting for final notification before restructuring salaries.

If implemented effectively, the change improves disposable income without increasing gross salary burden for employers. It strengthens structured compensation planning and reflects an attempt to modernise outdated tax thresholds.

Practical Case Study

Consider an IT employee in Bengaluru currently receiving ₹2,200 per month as tax free meal benefit under old rules. Under proposed framework, this could rise to ₹8,800 per month.

That is an additional ₹6,600 per month of tax efficient income. Over one year, that equals ₹79,200. For someone in the highest slab, tax savings could cross ₹25,000 annually.

This is equivalent to receiving a small salary increment without increasing employer cost to company in absolute terms, since it is largely restructuring of components.

Final Thoughts

The income tax exemption on meal cards could see one of its biggest revisions in decades if the Draft Income Tax Rules 2026 are approved in current form. The jump from ₹26,400 to ₹1,05,600 annual exemption is not just symbolic but financially meaningful.

However, this remains a draft proposal. Employees, HR departments and payroll professionals must monitor final government notification expected closer to March 2026.

If implemented as proposed, this measure could become a powerful salary optimisation tool for the salaried class starting FY 2026 to 27. Until then, stay informed, verify official sources, and consult tax professionals before making structural changes to your compensation planning.

Tags: income tax exemption on meal cards, draft income tax rules 2026, meal voucher tax exemption, old vs new tax regime, section 17(2)(viii), rule 3(7)(iii), salary restructuring India, tax free perquisites

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